Competition guard dog to protect Virgin

The competition watchdog will monitor domestic airline routes in a move to protect a rebooted Virgin Australia.

Treasurer Josh Frydenberg has instructed the Australian Competition & Consumer Commission to track prices in a bid to lookout for Virgin Airlines. Picture: AAP

Josh Frydenberg has ordered the competition watchdog to monitor domestic airline routes over the next three years in a move to protect a rebooted Virgin Australia and the commercial viability of the aviation sector.

The Treasurer said it was in the “national interest” to support the aviation sector, which has been crippled by the COVID-19 pandemic, and has instructed the Australian Competition & Consumer Commission to track domestic prices, costs and profits.

The Weekend Australian under­stands beefing up ACCC oversight of the domestic aviation market was intended to ensure a competitive two-airline sector.

Virgin Australia administrator Deloitte has also been put on ­notice that the sale of the failed airline could be blocked by the Morrison government if the ­successful bidder didn’t issue ­assurances to maintain regional services and jobs.

Grounded Virgin Australia aircraft are seen parked at Brisbane Airport in April. Picture: AAP

With the two rival bidders based in the US, the sale may ultim­ately rest on approval by the ­independent Foreign Investment Review Board, led by former spy boss David Irvine.

A senior government source confirmed it was possible an ­approval by the FIRB, based on a ­national-interest test, could require­ certain guarantees about critical regional services and workforce issues.

The Australian ­revealed on Friday that senior Morrison govern­ment ministers and region­al MPs were furious with administrators trying to salvage Virgin Australia, amid claims the process had been botched and concerns that domestic routes and jobs could be slashed.

US hedge funds, Boston-based Bain Capital and the Richard Branson-linked Cyrus Capital in New York, are expected to lodge their final bids to take over Virgin Australia on Monday.

Virgin Australia bondholders were due to meet with Deloitte ­administrator Vaughan Strawbridge on Friday afternoon to argue that the $2bn owed to them and unsecured creditors should be converted into equity ahead of the deadline for binding offers from the two main bidders.

The Australian Federation of Travel Agents also called on Deloitt­e on Friday to protect the estimated $100m of prepaid tickets. AFTA chairman Tom Manwaring said “consumers who have booked and paid in good faith must be able to fulfil their flights with the airline post-sale”.

ACCC chairman Rod Sims said the airline sector was a “critical industr­y to Australia”, citing the importance of restoring flights impacte­d by the COVID-19 pandemic­ to support the economy and “our way of life”.

“A sufficient level of competition provides consumer choice, and helps to maintain service levels­ and keep prices down over the long term,” Mr Sims said.

The monitoring regime will inform­ the government about the rate at which each airline is increasin­g capacity on domestic routes and whether airlines could be adding additional flights to “damage a competitor or drive them off the route”.

Mr Frydenberg said the govern­ment wanted the ACCC to ­obtain “relevant information and provide another avenue for those wishing to raise concerns about anti-competitive conduct”.

“A key matter covered will be the level of capacity the airlines are putting on each route and whether this is occurring in a way that may damage competition,” the Treasurer said.